Reopening of income tax assessment based solely on a tax evasion petition found unsustainable and quashed in favour of the taxpayer

Validity of reopening an income-tax assessment was challenged where the only basis was information from a tax evasion petition alleging large undisclosed income. The assessing officer lacked independent material to form a bona fide reason to believe that substantial income had escaped assessment, and the reliance on vague petition material was insufficient to sustain reassessment proceedings; consequently the reassessment notice was held unsustainable and quashed, reversing the reopening and restoring the assessment status quo in favour of the assessee.

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Issues: Whether the notice issued under Section 148 of the Income-tax Act, 1961 and the order disposing of objections to the reopening for A.Y. 2017-2018 are valid where the reasons for reopening consist solely of a bald assertion that income has escaped assessment based on an anonymous tax evasion petition.

Analysis: Applicable principles require that reasons recorded for reopening under Section 148 must provide material that gives the Assessing Officer a bona fide reason to believe that income has escaped assessment for the relevant assessment year. Reliance on an anonymous two-page tax evasion petition which refers to multiple group companies and does not attribute the alleged escaped income specifically to the assessee, and which contains vague allegations without particulars, does not constitute adequate material. Where the reasons recorded merely state a figure of escaped income without linking the information or evidence to the assessee or the specific assessment year, the statutory prerequisite for valid reopening is not satisfied.

Conclusion: The notice under Section 148 and the consequential order disposing of objections are quashed and set aside. The reopening and related orders are invalid and are therefore struck down in favour of the assessee.

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